Americas LCC capacity growing at half the speed of Asian market, but catching up with Europe; only three nations at +50% market share

Having looked at the low-cost market in Europe and Asia, this week anna.aero has turned its sights on the Americas, where the number of low-cost seats is set to surpass the half a billion barrier in 2018. While this is a monumental milestone, the recent history of the business model’s growth in the Americas shows that the LCC market is growing the slowest in this region, with anna.aero forecasting that low-cost operators will control 50% of the market by 2045, way behind the 2027 trajectory for Europe and 2030 for Asia. Southwest Airlines is the region’s biggest LCC, four times bigger than the #2 operator.

Having recently completed an analysis on low-cost market development in Europe and Asia over the past decade, this week anna.aero has decided to take a look at the development of the business model in the Americas. Our analysis moves from Greenland in the north, down to the southern tip of Argentina, looking at the 55 nations which lie in this part of the world as confirmed by the United Nations’ listing, which also includes all countries in the Caribbean. Please note that this article takes into account carriers which are classed as low-cost operators by OAG.

Home to over one billion people, split between 579 million in North America and 423 million in South America, around one seventh of the world’s population reside in this part of the world. Using data from Worldometer, a forecasting company which uses an algorithm to process data collected from the United Nations Population Division, the continent is certainly fast-paced when it comes to growth, with a total of 1.21 billion people expected to be living in the Americas region by 2050, a 21% increase from today’s level.

Low-cost seats hit half a billion in 2018

Low-cost departing seat capacity across the Americas will grow by around 4.6% this year, meaning it will pass the half-a-billion barrier for the first time. Since 2009, the year-on-year increase in departing LCC seat capacity across the Americas has averaged 5.4%, well below the 9.4% average for Europe and the 19% growth posted for the Asian low-cost sector. By passing half-a-billion seats, the Americas region joins Europe and Asia in this metric, with the Americas seeing 7.35 million more LCC departing seats in 2018 than Europe.

Source: OAG Schedules Analyser data.

Since 2009, the LCC market across the Americas has grown 60%, rising from 318.55 million departing seats in 2009 to 509.17 million this year. While Asia showed its slowest growth rate during the past decade this year, for the Americas 2018 is forecast to be its sixth best year for growth, surpassing the growth rates of 2.0% in 2012 and 3.0% in 2014, plus narrowly scraping past the 4.5% threshold achieved two years ago. However, as numbers for 2018 can still change, the suggested 4.6% forecast could go up or down.

Market share hits 30%; 50% expected by 2045

In 2017, low-cost carriers went over the 30% market share threshold of all seats in the Americas, with this level being maintained in 2018. This is a result which has risen from a market share of just under 25% in 2009. While the trend has shown that the LCC market is steadily advancing each year, it is easy to say that the development is slower than the business model’s advancement in Europe and Asia – LCCs have increased their market share in Europe by 13% during the same period, while they have progressed by 18 percentage points in Asia. Averaging an increase in market share of 0.7 percentage points between 2009 and this year, anna.aero has forecast that the low-cost model is likely to have a 50% market share of all seats in the Americas by 2045, way behind Asia (2030) and Europe (2027). This is of course based on if trajectory patterns continuing at the same rate which they have in recent years.

Source: OAG Schedules Analyser data.

Way behind Europe and Asia for advancement

With the Americas being the third global region that anna.aero has analysed for LCC development, with the others being Europe and Asia, we have decided to look to see how the three regions compare to each other with regards to low-cost advancement. As already stated, the market is growing at a much slower rate than those seen in the other two continents, however this graph below shows that seat capacity advances have been more consistent in the Americas.

Source: OAG Schedules Analyser data.

The variance between the biggest year for LCC growth in the Americas (2011; 8.7% growth) and the lowest (2012; 2.0%) is 6.7 percentages points, while for Europe the difference between the best (2015) and worst (2013) for capacity growth is 7.8 percentage points. However, with Asia the variance is much more stark, with there being a gap of 18 percentage points between the 29% growth recorded in 2010 and the 11% projected for this year. This highlights that while the Americas’ growth has been slower, it has perhaps been more sustainable and consistent than the other geographical regions.

Southwest by far biggest LCC

Southwest Airlines is by far the leading operator in the Americas, with it offering four times as many seats as the second biggest LCC – JetBlue Airways. The US’ leading LCC increased its seat capacity this summer by 3.0%, now offering over 126.26 million seats in S18. Southwest accounts for 41% of LCC departing seats from the Americas this summer, dropping from a market share of 43% in S17. What is interesting to note is that the US’ leading ULCCs, namely Spirit Airlines, Frontier Airlines and Allegiant Air, plus Volaris of Mexico, are the only airlines in the top 10 reporting double-digit growth.

Source: OAG Schedules Analyser data.

When using OAG schedules, it highlights that there are 27 LCCs operating in the Americas region, with the newest addition this year being WestJet’s in-house ULCC Swoop, which this summer is offering over 317,000 one-way seats. Outside of the top 12, strong growth this summer was reported by VivaAerobus (11th biggest LCC in the Americas; 24% capacity growth), VivaColombia (13th; 16%), Norwegian (14th; 80%) and WOW air (17th; 46%).

Puerto Rico most penetrated market in the Americas

With a market share of just under 59%, Puerto Rico is the most penetrated country market in the region by low-cost airlines. However, while it leads the top 20 in terms of market share, when it comes to the number of seats, it is the US which leads the way, with it home to 66% of all low-cost seats in the Americas, followed by Brazil (14% of LCC seats) and Mexico (9.7%). Along with Puerto Rico, only Mexico and Brazil see over 50% of the market controlled by low-cost carriers.

Source: OAG Schedules Analyser data.

One nation which has jumped up the rankings in recent years is Cuba, with it being the 19th biggest market for LCC penetration in 2018, with this growth coming as a result of Memorandum of Understanding that was signed between Cuba and the US on 16 February 2016, giving access for US carriers to the Cuban market.

Based on OAG Schedules, in 2018 there are 13 nations within the Americas which do not support low-cost flights, including Venezuela, the Americas’ 18th largest aviation market with regards to seat capacity (3.45 million departing seats in 2018). Along with Venezuala, the following also have zero low-cost operations when referencing OAG: Anguilla; Bonaire; British Virgin Islands; Dominica; Falkland Islands; Greenland; Guyana; Montserrat; Saint Barthelemy; Saint Pierre and Miquelon; St. Kitts and Nevis and St. Vincent.

Excluding markets with zero market presence from low-cost operators, the nation which has seen the lowest penetration is Bolivia, with only 0.9% of seats being flown by an LCC, that being GOL’s routes from Santa Cruz Viru Viru to Rio de Janeiro Galeao and Sao Paulo Guarulhos. Other markets showing a low-level of LCC market share include: Panama (0.9%), Ecuador (1.3%); Peru (1.8%); Guadeloupe (3.0%); Suriname (3.1%); Curaçao (3.6%); Martinique (3.6%); and Argentina (4.4%).

Pictured at the launch ceremony of Swoop services in Abbotsford back in June were: Henry Braun, Mayor of Abbotsford; Simon Gibson, Member of the British Columbia Legislative Assembly for Abbotsford-Mission; Bruce Ralston, Minister of Jobs, Trade, and Technology, British Columbia; Edward Sims, President & CEO, WestJet; Dave Loewen, Abbotsford City Counciller; Steven Greenway, CEO, Swoop; and Robin Dhir, Director, Abbotsford Airport. The airline will link Abbotsford to Winnipeg and Edmonton as well. Swoop is the only new ULCC to launch in the Americas market this year.